Dilapidations: To Repair Or Not To Repair?

Summary and implications

The Court of Appeal has confirmed some fundamental points in relation to liabilty for dilapidations (Sunlife Europe Ltd v Tiger Aspect Holdings Ltd [2013] EWHC 463 TCC):

A landlord's more extensive works caused by a tenant's breach will not prevent recovering the cost to remedy the breach. Where market conditions require upgrading in order to re-let premises, a tenant is not liable for works that would be subsequently abortive by supersession. A tenant must comply with its lease obligations although he is entitled to perform his covenants in the manner that is least onerous to him. Tiger's occupation of the premises

The tenant, Tiger Television Ltd, occupied commercial premises in Soho under two leases granted in 1973. When the leases were granted the premises were built to a state-of-the-art standard and the leases contained full repairing covenants.

Tiger acquired the premises in 2000, by which time they were already in a poor state of repair. Tiger carried out some works of refurbishment and repair to the premises but simply to make them suitable for its own needs.

Tiger's leases came to an end in 2008 and the landlord at the time, Sunlife Europe Properties Ltd, brought a terminal dilapidations claim against Tiger and its guarantor, Tiger Aspect Holdings Ltd.

Tiger's repairing obligations

Tiger acknowledged that it had not complied with the repairing covenants in its leases at the end of the term. However, it disputed the value of Sunlife's dilapidations claim, which, at the time of the trial, was £2.172m plus interest.

Sunlife argued that it was entitled to the sum claimed (which was less than the actual amount that Sunlife had spent) in order to put the premises into the condition in which they should have been left by Tiger.

The issues to be decided

The court had to consider two main issues:

the standard to which Tiger should have repaired the premises; and whether the additional work by the landlord might make the work required by Tiger worthless (known as supersession). Standard of repair

The standard of repair required should be judged by reference to the condition of the fabric of the premises, their condition and fittings at the time of the demise. The standard was not the condition that would be expected of equivalent premises at the expiry of the leases.

The judge found that a tenant is not obliged, nor even entitled, to deliver up the premises in a condition that involved any material alteration to the...